North West housing association secures sustainability-linked private placement in ‘sector first’
A Manchester housing association has agreed a £120m private placement which it claims is the first in the social housing sector to be linked to delivering sustainable outcomes.
Southway Housing Trust described the bond as a ‘sustainable use of proceeds’ deal intended to help it achieve sustainability goals.
These include: all new homes to meet Energy Performance Certificate (EPC) Band B or above; fuel-poor households to be at EPC C or above by 2030 and all existing homes by 2035; no gas heating in new homes by 2025 and all new heating programmes to existing properties to be non-gas by 2025; an electric vehicle fleet by 2025.
The 6,300-home landlord said that high demand from investors meant the bond increased from its original £85m launch, with the order book six times oversubscribed.
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Money from the deal will also be used to help deliver Southway’s 1,600-home development plan, as well as to reduce debt costs.
Karen Mitchell, chief executive of Southway, said: “Obtaining funding now with deferrals in one and two years’ time is really important.
“It gives Southway financial certainty during these changing times and means we can continue to work towards our ambitious targets to deliver new homes in South Manchester and our vision of thriving communities.
“We are also really pleased the funding market has responded well to our sustainability offer, with strong green and social principles, which are at the heart of Southway’s strategic objectives and operations.”
Sustainability-linked finance has become increasingly common in the social housing sector, mostly arranged through public bonds.
Interest rates were secured at lower-than-expected levels, freeing up extra funds for Southway’s work, chief financial officer David Clermont said.
Mike Roche, a director at Savills Financial Consultants – the deal’s financial advisor – said that the placement “demonstrates the ongoing size of investor appetite to work with housing associations [and] shows the importance of being able to clearly communicate how your investment will help achieve specific environmental, social and governance goals”.
The sole private placement agent was NatWest Markets.
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